Tech Stocks Drive Markets Higher – Nasdaq up 2%
US inflation data came in largely on expectation on Friday and investors piled back into tech stocks taking the major indices higher again. The Dow closed 0.40% with the more tech-heavy S&P notching stronger gains, finishing the day up 1.02% and 2.03% respectively. US treasury yields were relatively quiet, the 10-year edging lower by the close, dropping 4 basis points to 4.671% and the 2-year seeing little change, closing at 4.998%. The dollar did see some gains with the Dxy pushing 0.3% higher, once again the Yen was the most volatile currency dropping hard against the greenback to hit fresh historic lows. Oil pushed higher again, Brent adding 0.55%, up to $89.50 per barrel and WTI gaining 0.34% to $83.85. Gold pushed higher on the day, capping near $2,350 and closing around $2,334 per ounce.
Fed in Focus Again this Week
It was a busy week for investors last week and this one could be even more lively with a big focus on the US with a myriad of data due out as well as the latest Fed meeting. The PCE Price Index number came in largely on expectations on Friday, with the month-on-month number showing a 0.3% increase. This confirmed what the market already knew, inflation is still very sticky, and the likelihood of a Fed cut continues to be pushed out further in the year. Currently, the market has a 58% chance of a rate cut pencilled in for September, that percentage down from 68% just a week ago. With ‘no rate change’ locked in, investors will be looking for the change in the message that we get from Jerome Powell on Wednesday with most thinking that a more hawkish tone is the most likely outcome. This week’s data will also give markets further updates on the state of the US economy and the combination of the two could see markets at very different levels by the close of trading on Friday.
Another Quiet Monday Ahead of a Bumper Week
The event calendar is relatively thin on the ground for the first day of the trading week today. However, traders expect more volatility than usual with a bumper week ahead of them. FX traders will be closely monitoring the Yen, it’s sitting at historic lows against the dollar and on the crosses and despite a Japanese holiday today, the threat of intervention is still high. There is nothing of note on the calendar in the Asian session with the main risk events coming during the London session with the release of key CPI numbers out of Germany and Spain. The New York session experiences its only quiet session of the week with nothing scheduled to trouble the scorers, but that changes quickly in the days ahead.
